Rich Lesser, global chairman of the Boston Consulting Group, discusses new research showing AI is becoming a major source of stress for CEOs on The Claman Countdown.
Snap announced plans on Wednesday to lay off about 1,000 employees, according to the technology company’s policy artificial intelligence (AI) and wants to streamline its operations.
The parent company of Snapchat will also close more than 300 open positions as part of its workforce restructuring, which comes after Irenic Capital Management pushed Snap to optimize its portfolio and performance. The company is an activist investor with an economic interest of approximately 2.5% in the company.
Snap explained that advances in AI will help streamline operations and operate with smaller teams, as AI generates more than 65% of new code, while the company assigns more critical work to focused teams and AI agents.
The tech company had about 5,261 full-time employees as of December, and the layoffs will affect about 16% of the company’s full-time workforce.
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Snapchat is laying off about 16% of its full-time employees as it restructures its workforce. (Frederic J. Brown/AFP via Getty Images)
Shares of Snap rose nearly 8% on Wednesday on the news, leaving the stock down about 25.7% year to date despite a 29% gain in the past month.
The company expects to save more than $500 million in annualized expenses by the second half of the year, significantly as a result of the recent announced layoffsas well as broader efforts to reduce operating costs and stock-based compensation, CEO Evan Spiegel said. He asked employees in North America to work from home on Wednesday.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SNAP | SNAP INC. | 6.04 | +0.44 |
+7.86% |
Snap expects $95 million to $130 million in layoff-related costs, most of which will fall in the second quarter, according to a filing with the regulator.
The layoffs at Snap come after the company invested heavily in it augmented reality glasses unit, known as Specs, and plans to launch the product this year.
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Snapchat has invested heavily in augmented reality glasses. (Alisha Jucevic/Bloomberg via Getty Images)
Irenic Capital has urged Snap to spin off or close the business unit, which has received $3.5 billion in investments, as a way to save money as the company pursues broader cost cuts.
“Cutbacks may reassure an activist in the short term and provide some relief to long-suffering shareholders, but whether this really leaves the company with a defensible business model and competitive position that it can defend, develop and translate into profit and cash flow is still unclear,” said Russ Mould, investment director at AJ Bell.
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Reuters contributed to this report.
